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2017 EXECUTIVE GUIDE: WEALTH MANAGEMENT X

2017 EXECUTIVE GUIDE:

WEALTH MANAGEMENT

CRAIN’SCRAIN’SCUSTOM MEDIA

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2017 EXECUTIVE GUIDE: WEALTH MANAGEMENT

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Welcome to Crain’s annual Wealth Management Guide, a special advertising supplement in which top Chicago-area financial advisers share tips and tactics for achieving and maintaining

investment success for yourself and your loved ones.

In this issue, writer Jane Adler details the five don’ts of portfolio rebalancing. One big one: overlooking cash. Selling assets to rebalance can generate both trading and tax costs. Especially during peak earning years, consider buying more stock with cash if you need to bulk up on equities. “Use cash flow to optimize rebalancing,” one adviser says. Market dips can also present good opportunities to rebalance with cash.

Adler also explores the growing number of online money management tools that help investors keep track of all their financial transactions and make prudent investment choices. Young professionals are especially interested in having that data quickly available via a mouse click. They want the convenience of one application so they can monitor their finances without having to track and navigate multiple websites, security questions and passwords. Sounds like a good idea for investors of any generation, doesn’t it?

Is a registered investment advisor right for you? An increasing number of wealth managers suggest they should be part of the mix for investors, Adler

reports. RIA firms offer services for a fee and act as a fiduciary. That means managing assets with an obligation to put the client’s interests first, rather than potentially directing investment dollars toward vehicles that pay advisers a higher commission. “RIAs are becoming the desired model for financial advice,” notes one adviser. “The advantage to consumers is more transparency and objectivity.”

With the Federal Reserve poised to raise interest rates perhaps twice more this year, the trend toward increasing rates will have an impact on investment strategies. Investors need to carefully recalculate their approach, experts say. That means analyzing the outlook for stocks, bonds and alternatives that could provide a hedge against inflation. Adler presents some strategies worth considering.

If you need in-depth wealth management advice, please consider the sponsors of this guide, who all work in the Chicago market to build the strongest possible investment portfolios for their clients. These fine sponsors include First Midwest Bank, The PrivateBank, Savant Capital Management, Wells Fargo Private Bank, Wipfli Hewins Investment Advisors, and the matrimonial and family law firm Berger Schatz.

CONTENTS

A WEALTH OF ADVICE ON BUILDING A WINNING INVESTMENT PORTFOLIO

Matrimonial and Family Law Attorneys

FEATURESTIME TO REBALANCE YOUR PORTFOLIO? AVOID THESE 5 MISTAKES........................................................................................Pg. 22NEW MONEY MANAGEMENT TOOLS IMPROVE TRANSPARENCY, HELP BOOST RETURNS...................................................Pg. 24IS AN RIA RIGHT FOR YOU?..........................................................................................................................................................................Pg. 26 RISING INTEREST RATES SHIFT INVESTMENT OUTLOOK................................................................................................................Pg. 28

BERGER SCHATZ..............................................................................................................................................................................................Pg. 18FIRST MIDWEST BANK...................................................................................................................................................................................Pg. 21 THE PRIVATEBANK..........................................................................................................................................................................................Pg. 23WIPFLI HEWINS................................................................................................................................................................................................Pg. 25WELLS FARGO PRIVATE BANK....................................................................................................................................................................Pg. 27SAVANT CAPITAL MANAGEMENT...............................................................................................................................................................Pg. 29

CONTRIBUTING SPONSORS


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At First Midwest, we know it’s not just about wealth management, it’s about helping you build a legacy. For your business. And for your family. We combine our deep expertise with dedicated personal service to help you navigate even the most

complex financial situations. So you can build something that lasts.

Contact a Wealth Management Officer today at 800.369.4065 or FirstMidwest.com/WM.

Trust | Private Banking | Institutional

Wealth Management services are offered through First Midwest Bank. Most Wealth Management products are not FDIC insured.

What will your legacy be?

MANAGING EXECUTIVES: Michael Scudder, President and CEOMark Sander, COORobert Diedrich, President Wealth Management Division

FOCUS: The mission of First Midwest Wealth Management is to help people, organizations and businesses manage their finances and investments so they can achieve their goals. We offer trust and fiduciary services; wealth planning; investment management; real estate and farm management; custody and institutional asset management; retirement benefit services; and private banking.

We know that your financial life can get complicated and we help you manage it. We are willing to take on complex financial situations under $10 million that the big banks don’t want to handle. We have the depth of resources you need and the personal service you want. We can help with your business and your retirement so you can work on your legacy.

CLIENTS: Trust and private banking clients include high-net-worth individuals and families, corporations and nonprofit organizations.

INVESTMENT PHILOSOPHY: We begin by assessing your complete financial situation and goals. We help you weigh the trade-offs in financial decisions and then develop an investment plan customized to you.

We employ a “core” and “satellite” approach to portfolio construction. The core portion consists of traditional asset classes of stocks, bonds and cash. When determining the appropriate percent in stocks, bonds and cash, we utilize a quantifiable model of risk and return statistics from Modern Portfolio Theory. The satellite portion is designed to help achieve greater diversification, and may include asset classes or strategies such as real estate, hedge funds, commodities, high-yield and emerging markets depending on the investor profile.

High-Net-Worth Individuals: 65%

Pension and Profit Sharing Plans: 20%

Charitable Organizations: 10%

Corporations or Other Businesses: 5%

CLIENT DIVERSIFICATION:

COMPANY NAME: First Midwest Bank, Wealth Management Division ADDRESS: One Pierce Place, Itasca, IL 60143 (moving to Triangle Plaza, Chicago, in 2018)PHONE: 800-369-4065

WEBSITE: firstmidwest.com/wmTOTAL EMPLOYEES: 2,000 +YEAR ESTABLISHED: 1940

MINIMUM ACCOUNT: $500,000

ASSETS UNDER MANAGEMENT: $9.5 billion

Our clients come to us because we have the financial acumen to handle complex personal wealth and family estates, as well as the experience and discretion to guide them through the most challenging personal circumstances.

Wealth is Complex.Divorce is Complicated.

We Understand Both.

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22 2017 EXECUTIVE GUIDE: WEALTH MANAGEMENT

Asset allocation is a moving target. Stock markets rise and fall. Changing interest rates impact bond performance. A fairly typical portfolio of a 60/40 split between stocks and bonds can easily get off-balance as economic conditions change Experts say portfolios should be rebalanced periodically with the sale or purchase of assets to meet target allocations. But the goal is to rebalance without triggering unforeseen and negative consequences. Here are five common mistakes to avoid when rebalancing a portfolio.

Not rebalancing. The biggest and perhaps most obvious mistake is to forget to rebalance or to not do it at all, says William T. Norris, managing director, chief investment officer and head of asset management for private wealth at The PrivateBank, Chicago. “You need a consistent process.” Take, for example, the recent run up of the stock market. The five-year return for the S&P 500 stock index as of March was nearly 68 percent, according to YCharts, a research data platform. Index fund investors who haven’t rebalanced would have a greater exposure to equities than their tolerance for risk might advise. It’s easy to enjoy the ride on the way up and forget to rebalance, but a market correction can quickly remind investors to pay attention. “Know where you are,” Norris says. Another consequence of not rebalancing is the loss of diversification, says Rafia Hasan, director of investments, Wipfli Hewins Investment Advisors, an advisory firm in Chicago. She gives the example of U.S. equities that have done well over the last five years. After the run-up, the stock portion of a portfolio may be too heavily weighted in U.S. equities and not have enough exposure to international stocks as global growth is expected to rise. “It’s something to consider,” she says.

Ignoring taxes. One investor, who thought he was being prudent, decided to rebalance his portfolio by selling about 10 percent of his over-performing equities to reinvest in bonds. But the sale of the equities triggered capital gains that resulted in a $40,000 tax bill. Investors get overly focused on their strategy, notes Jack Ablin, chief investment officer, BMO Private Bank. “Taxes are a whole dimension that

individuals under appreciate,” he says. Also, long-term gains on assets owned more than a year are taxed at a lower rate than short-term gains. The goal is to consider the after-tax return and not the top-line gain, Ablin says. Start by selling assets with long-term gains. Another approach to consider is tax-loss harvesting. Securities are sold at a loss and the proceeds are used to purchase a similar, but not identical security. The loss generates a tax deduction but maintains the portfolio’s balance, The PrivateBank’s Norris says. For example, the proceeds from the sale of stocks at a loss can be reinvested in an equity exchange-traded fund. “We look at that on an active basis,” Norris adds.

Being tied to the calendar. For simplicity’s sake, many investors rebalance either quarterly or annually. But a more nuanced approach can result in better returns, according to Brent

Brodeski, CEO at Savant Capital Management, a fee-only registered investment advisor based in Rockford with offices throughout the Chicago area. He suggests monitoring a portfolio weekly to see whether it’s moving away from or toward certain targets. For example, if stock holdings

hit 53 percent of a portfolio and the target is 50 percent, it might be time to rebalance as long as the tax consequences are not too great. Note that rebalancing assets in a 401(k) or IRA account is not considered a taxable event. In that case, Brodeski says, “Rebalance away.” Rebalancing every quarter is probably too often, according to Norris at The PrivateBank. Investors can end up chasing a market trend or selling stocks to avoid volatility. “Being too emotional is a mistake,” Norris says. “The more often you rebalance, the more emotional you are likely to become. Then you’re just churning your portfolio and creating costs.” Don’t forget the fees associated with buying and selling securities during the rebalancing process. Fees figure into the overall cost.

Not correcting course. Life events such as a death in the family or divorce can quickly throw a portfolio out of whack as assets are divvied up. For example, the time to analyze the consequences of divorce is prior to the final settlement, according to attorney Michael J. Berger, principal at Berger Schatz, a family and matrimonial law firm in Chicago. An astute lawyer won’t just divide stock shares in half, but will determine the cost basis, or the original value of the stocks for tax purposes. Berger explains that shares purchased at a relatively low price which have appreciated greatly will be subject to more capital gains at liquidation than shares of the same stock that were purchased more recently. Stocks should be divided equally on the cost basis. “Individuals can get taken advantage of,” Berger warns. In some cases, a spouse may need to rebalance and liquidate certain assets to meet investment goals or to generate cash to cover expenses. Berger prefers the spouse to have a financial advisor prior to the divorce settlement. “We want someone to advise our client who can provide a range of options,” Berger says.

Overlooking cash. Investors in the so-called accumulation phase of their careers—when they still have a relatively long time horizon—should use cash to rebalance their portfolios when possible, advises Hasan at Wipfli Hewins. Selling assets to rebalance a portfolio will generate trading costs and perhaps also capital gains taxes. Instead, investors should buy more stock with cash if they’re underweighted in equities. “Use cash flow to optimize rebalancing,” Hasan says. Market dips can also be an opportunity to rebalance with cash. For those nearing retirement, Brodeski at Savant suggests making contributions to retirement accounts based on the performance of the portfolio. If the portfolio has too much invested in equities,

contributions can be used to purchase bonds to bring the allocation into balance. For retirees, the cash from required minimum distributions can be used to buy the assets needed to bring the portfolio into equilibrium. “Rebalance as you go,” Brodeski says.

Time to Rebalance Your Portfolio?Avoid these 5 mistakes

By Jane Adler

“The more often you rebalance, the more emotional you are likely to become. Then you’re just churning your portfolio and creating costs.”-William T. Norris, managing director, chief investment officer and head of asset management for private wealth at The PrivateBank, Chicago.


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BUILDINGRELATIONSHIPS

THAT BUILDFUTURES.WE SOLVE FOR X

ThePrivateBank.com

Trust services and investment products are not FDIC insured; not deposits or obligations of, or guaranteed by, The PrivateBank; and are subject to investment risk, including loss of principal.

Partnering with a bank for the right advice at the right time is the difference between a financial plan…and a plan of action. Only The PrivateBank has the expertise

in private wealth management to understand your unique needs and provide solutions that put your future into action. At The PrivateBank, we don’t just solve for X - we solve for X for you. Inquire with Bill Norris, Chief

Investment Officer, at 312-447-7882

MANAGING EXECUTIVES: Larry D. Richman, President and CEO Brant Ahrens, President - Personal Client ServicesKristine Garrett, President - Private WealthWilliam Norris, Chief Investment Officer Daniel Sullivan, Jr., Head of Personal Advisory Services

ASSETS UNDER MANAGEMENT: $9.8 billion (as of March 31, 2017) MINIMUM ACCOUNT: $1 millionAVERAGE ACCOUNT: $2.75 million AVERAGE RELATIONSHIP: $10.75 million CLIENTS: 826

FOCUS: The Private Wealth team at The PrivateBank works with individuals, families and business owners to deliver private banking, investment management and personal trust services. We work closely with individuals and families that are building, preserving or transitioning wealth, taking the time to understand their objectives and aspirations. We also have specific expertise in working with business owners and corporate executives. Our Corporate and Institutional Services group focuses on investment management, custody/escrow and retirement plans designed for middle market companies, non-profits, endowments, registered investment advisors and professional service firms. Our clients are served by experienced teams of advisors committed to building relationships and delivering independent and objective advice. INVESTMENT PHILOSOPHY: We view ourselves as stewards of our clients’ wealth and focus on preserving and growing client assets in a prudent manner. We seek to manage risk by constructing globally diversified portfolios and investing for the long-term, while making adjustments to reflect our near-term views of the global economy and markets. • We believe that diversifying portfolios will lead to successfully meeting our clients’ individual goals. • We think that markets are efficient, but there are periods where inefficiencies can be observed and opportunities will present themselves for our clients.• We believe that investment success requires a strong focus on controlling portfolio risk, monitoring results and actively communicating with our clients.

Every client is unique. Our focus is to leverage our disciplined investment process for portfolio construction and apply that methodology to establish individual investment plans for our clients to secure their families’ future and provide peace of mind.






COMPANY NAME: The PrivateBank ADDRESS: 120 S. LaSalle St., Chicago IL 60603 PHONE: 312-447-7882

WEBSITE: theprivatebank.com TOTAL EMPLOYEES: 1,300YEAR ESTABLISHED: 1991

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24 2017 EXECUTIVE GUIDE: WEALTH MANAGEMENT

What’s your net worth this morning? How about your credit card balance? Almost over the limit? Was the

mortgage payment made on time yesterday? Are your monthly expenses running ahead of budget? Wealth advisors have the answers. These firms are introducing online services and new technologies to help clients manage their money and meet their financial goals. At the same time, new automated computer models––or so-called robo-advisors––are being rolled out to offer investment advice at a low price. First Midwest Bank offers Wealth Vision, a service that consolidates all of a customer’s accounts to give them an instant snapshot of where they stand. Introduced several years ago, the service pulls together information from accounts held in

the bank as well as accounts at other institutions. The application tracks expenses, and compares results to a budget. “It’s pretty slick,” says Bob Diedrich, director of wealth management at First Midwest Bank, Joliet. He uses the service himself, and says it’s easy to sign up. Account information, with client permission, is extracted nightly from various institutions to update the client’s finances. “Once clients start using it, they’re hooked,” Diedrich says. He adds that with client approval to access the collected data, the bank’s advisors can offer suggestions on investment strategies. “We can do some planning,” he says. So-called account aggregation technology, like that offered by First Midwest, is growing in popularity. The services typically offer many of the same features, consolidating the user’s financial information and accounts. Mint.com is a web-based financial aggregation service that allows users to track bank, credit card and loan balances, as well as set budgets and financial goals. Mint.com says it has 20 million users. Consumers today expect to have an easy way to track their finances, advisors say. Young professionals are especially accustomed to having data quickly available through a mouse click. They

want the convenience of one application so they can monitor their finances without having to track and navigate multiple websites, security questions and passwords. Account aggregation technology is being introduced by Savant Capital Management, a fee-only registered investment advisor based in Rockford with offices throughout the Chicago area. Clients will have access to all of their account information online. They can monitor their overall net worth. When a mortgage payment is made, for example, the system adjusts the client’s level of debt. “We are making a huge investment in technology,” says Brent Brodeski, CEO at Savant. “This will empower our advisors to deliver services more efficiently, and faster.”

Clients will be able to access the information from their smart phones, tablets, laptops or PCs. “It’s easy,” Brodeski says.

Service integrationBMO Private Bank offers Wealth Connect, a service that provides a financial snapshot tied into the client’s financial plan. “It’s a great way to gauge how you’re doing,” says Jack Ablin, chief investment officer at Chicago-based BMO Private Bank. Wealth Connect allows users to set up email alerts. If a bill is paid automatically for more than, say, $1,000, the client receives a notice. Or if a balance falls below a certain level, the system sends out an alert. “Clients love it,” Ablin says. Wipfli Hewins Investment Advisors offers eMoney Advisor, an interactive wealth management platform. The software helps clients explore the risks and benefits of various plans updated in real time, and aggregates information on various accounts. “We can share information with clients in a secure manner,” says Lora Murphy, principal and senior financial advisor at Wipfli Hewins, Chicago. Murphy helped pioneer the use of eMoney Advisor at Wipfli Hewins.

Investment plans are customized for each client. As a CPA-based financial advisor, Wipfli Hewins is able to integrate tax planning into the process. Clients can have their taxes calculated and project how taxes will impact their overall returns. Wipfli Hewins also offers a portal where clients can review investment performance. Investments are charted against the market and other benchmarks. The firm’s website features a financial blog that covers a variety of investment topics. “We have great research and educational tools for clients,” Murphy says. Other types of services are available that can help boost returns. One of the most popular trends is the rise of the investment robo-advisor. These are computer algorithms that automate the allocation of assets and rebalance investments for a relatively low fee. Though the initial idea of the robo-advisor was to eliminate the human element, many companies are now pairing software programs with human advisors to customize advice. Also, a common complaint is that robo-advisors can’t provide the personal investment counseling often needed to manage a sizable amount of assets or navigate the financial ramifications of a divorce or death in the family. The robo-advisor Betterment, with $7 billion in assets, announced last January that it would create a call center with live financial advisors to answer questions, something customers had been requesting. First Midwest Bank’s broker affiliate has a robo-option in the works, but the bank has established a call center with consultants available to answer investment questions by phone. “Customers can talk to a live person,” First Midwest’s Diedrich says. Coupling real people with robust technology is probably the wave of the future, predicts Savant’s Brodeski. Five years from now, powerful algorithms will be combined with guidance from a professional––and personal––advisor to provide comprehensive financial planning, investment strategies and tax services. Technology is able to enhance human capabilities and make advising faster, smarter and better, Brodeski says. “We’ll have bionic advisors.”

New Money Management Tools Improve Transparency, Help Boost ReturnsBy Jane Adler

“We can share information with clients in a secure manner.” -Lora Murphy, principal and senior financial advisor at Wipfli Hewins, Chicago.”


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Your family. Your business. Your legacy.Life’s defining moments deserve more than “traditional” financial advice.

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov.

As a leading, CPA-based financial advisor, we constantly challenge ourselves to find better solutions for our clients — and we’re prepared to tackle the tough questions. Together, we’ll design a proactive financial and investment plan that instills the confidence you need to achieve your personal and business goals, on your terms.

Ready to get started? Contact Lora Murphy, Chicago Practice Leader, at [email protected] or 888-520-3040.

Bring your entire financial life together.

Family Office Services

Fiduciary Investment Advice

Interactive Financial Planning

Insurance & Estate Planning

Charitable Giving & Trusts

Retirement Plan Services

Business Exit Planning

Tax Planning & Coordination

MANAGING EXECUTIVES: Roger Hewins, PresidentLora Murphy, CPA, CFP®, CDFA™, Principal/Chicago Practice LeaderASSETS UNDER MANAGEMENT: $4.45 billion MINIMUM ACCOUNT: NoneAVERAGE ACCOUNT: $2.48 million

FOCUS: As a CPA-based, fiduciary advisor, Wipfli Hewins sees things differently. We recognize that our clients have complex financial needs requiring advice that extends far beyond the confines of traditional wealth management.

Whether they’re preparing for life after their business, securing their legacy for the next generation or planning for retirement, our clients benefit from a full spectrum of solutions to help fulfill their financial needs, including tax-efficient strategies, estate planning, investment advice, insurance, charitable giving and more. By pairing the power of interactive planning technology with the expertise of our advisory team, we analyze our clients’ current financial situation and rehearse their long-term goals, all in one place.

Wipfli Hewins upholds the fiduciary standard of care, which means we’re committed to putting our clients first. We offer personalized, well-conceived advice that we believe is the best fit for their financial goals and well-being.

CLIENTS: Wipfli Hewins provides integrated financial planning, investment management and insurance consulting services to individuals, multigenerational families, small businesses, nonprofit organizations and employer-sponsored retirement plans across the U.S. Our integrated approach with Wipfli LLP, coupled with institutional investment resources, enables us to offer clients expansive services, such as integrated tax planning and preparation; business succession and exit planning; private equity and alternative investment programs; and family office services.

INVESTMENT PHILOSOPHY: We believe that our clients’ investment strategy should be as focused as their financial plan. That’s why we follow a consistent, research-driven investment approach and focus on the factors we can control:

• Broad diversification, which helps mitigate risk and frees our clients from the guessing game; • Tax awareness — employing effective asset location and tax-loss harvesting strategies helps our clients keep more of what they earn;• Time-tested academic research into the behavior of financial markets and investors; and • Cost-efficient and low-turnover funds, which aim to enhance long-term investment growth and keep clients on track toward achieving their financial goals.


Pension, Profit Sharing and Employer Plans: 18%

Charitable Organizations, Corporations or Other Businesses: 10%

Emerging Investors: 8%


COMPANY NAME: Wipfli Hewins Investment Advisors, LLCADDRESS: 318 W. Adams St., Suite #800C, Chicago, IL 60606 PHONE: 888-520-3040

WEBSITE: wipflihewins.com TOTAL EMPLOYEES: 75YEAR ESTABLISHED: 1999


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I nvestors have a range of options of where to get advice and park their assets. Banks, trust companies, traditional stock brokers and online

trading platforms are all viable alternatives. But a growing number of investors have turned to registered investment advisors. An RIA firm offers its services for a fee and acts as a fiduciary. By definition, a fiduciary manages the assets of a client and has a legal and ethical obligation to put the client’s interests first. Financial advisors who are fiduciaries must disregard how they will be compensated in order to help the client make the best decisions. The Securities and Exchange Commission regulates RIAs. “RIAs are becoming the desired model for financial advice,” says Brent Brodeski, CEO at Savant Capital Management, a fee-only RIA based in Rockford with offices throughout the Chicago area. “The advantage to consumers is more transparency and objectivity.” Originally, RIAs developed as a fee-based alternative to brokerage firms that charge commissions on transactions. Brokers are required to make suitable investment recommendations, but they are not required to meet fiduciary standards. That could be changing. A U.S. Department of Labor rule is set to be phased in beginning this June that expands the definition of the investment advice fiduciary. Unless the rule is repealed, brokers who work with retirement plans will be bound to meet the standards of a fiduciary. “The rules are migrating,” says Jack Ablin, chief investment officer at BMO Private Bank, Chicago. “More and more of the broker’s work is moving to a fiduciary role. The lines between brokerage firms and RIAs are getting blurred.”

Neutral adviceWhile investment business models continue to evolve, RIAs have grown in popularity with individual investors. Over the last 10 years, RIAs grew 12 percent annually, according to a 2016 RIA study by investment firm Charles Schwab, which provides services for 7,000 RIAs. “RIAs put the client first,” Brodeski says.

“There are no undisclosed conflicts of interest.” He adds that an RIA is not paid a commission on transactions and therefore cannot recommend a certain investment for the purpose of generating a big commission. “An RIA is aligned with the interests of the client,” Brodeski says. Increasing numbers of new investors are looking for an advisor that acts as a fiduciary, notes Lora Murphy, principal and senior financial advisor at Wipfli Hewins Investment Advisors, who covers the Chicago area from her office in Milwaukee. Wipfli Hewins—a registered RIA affiliated with the Wipfli accounting firm—integrates tax, financial planning and investment advisory services. “We have to be transparent with our clients, which is a great way to build relationships,” Murphy says. Client education is a big part of that relationship, she adds. “We are service oriented.” A business owner, for example, who sells a company and acquires sudden wealth, may not know what to do with all the money. A similar scenario could play out for an individual who receives a big inheritance. They understand the money has to get them all the way through retirement, but they might not know how to make that work, Murphy says. “We provide a high level of financial education.”

Service integrationAnother trend is that RIAs are integrating various financial services into their offerings, Murphy says. At Wipfli Hewins, for example, clients have a team of advisors. Tax accountants are available to prepare taxes and consult on state, local and federal tax issues. The tax component is integrated with financial planning services. “After-tax returns matter,” Murphy says. “Clients really appreciate that.” First Midwest Bank offers a range of options, including traditional trust services, such as wealth management and estate planning. Trusts are subject to fiduciary standards. In March, First Midwest Bank acquired Premier Asset Management, a Chicago-based RIA. The bank also offers traditional brokerage services. “We can tap into different investment strategies,” says

Bob Diedrich, director of wealth management at Joliet-based First Midwest Bank. For example, First Midwest Bank offers a small-cap stock investment strategy that has performed in the top 1 percent of managed funds in the category over the last five years, Diedrich says. While the RIA lacks a small-cap product, it can offer its clients diversification through the bank’s fund. “It has a great track record,” Diedrich says. “We’re offering the right thing for the client.” It’s important to note that so-called hybrid advisors are allowed to conduct both fee- and commission-based business. Many investors prefer this structure since it offers flexibility. While RIA firms do not work on commission, their fee structures vary. The most common fee arrangement is an annual percentage of the portfolio value, sometimes referred to as an asset under management fee. The percentage may vary, but typically hovers around 1 percent. All types of financial advisors are moving toward some fee-based arrangements. In a 2016 study, CLS Investments found that advisors derive 45 percent of their revenue from transaction-based commissions and 46 percent from fees—a number expected to reach 55 percent in the next few years. On average, RIA annual client advisory fees dropped from 1.03 percent annually in 2015 to 0.99 percent in 2016, according to surveys conducted by RIA in a Box, a New York-based services and technology firm that advises RIAs. RIA firms that actively manage investment portfolios for clients have an average annual advisory fee of 1.12 percent compared to a 0.88 percent average advisory fee for firms that passively manage investment portfolios, according to RIA in a Box. Other arrangements are available. At Wipfli Hewins, financial planning can be billed on an hourly basis. This arrangement may suit business owners who haven’t accumulated a lot of financial assets, but still need help to develop an investment strategy. “We are always looking for ways to provide services and charge in a way to help clients,” Murphy says.

Is an RIA Right for You?By Jane Adler

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Make sure your values are catching on.You want to know that your family feels secure, no matter what the state of the economy is. You want the depth of your experience to catch on with your children—and theirs. The Private Bank takes a personal interest in helping you make sure there’s continuity to the goals and values that got you to where you are today. Our experienced professionals are committed to building a custom wealth management plan that reflects your needs, so that you can focus on shaping your legacy for generations to come.

To start a new kind of conversation, contact your local Wells Fargo Private Bank office:

Chip FlannaganSenior Vice President – Regional Managing [email protected]

Wells Fargo Private Bank provides products and services through Wells Fargo Bank, N.A., the banking affiliate of Wells Fargo & Company, and its various affiliates and subsidiaries. Brokerage services are offered through Wells Fargo Advisors, LLC, member SIPC, a registered broker-dealer and separate non-bank affiliate of Wells Fargo & Company. Trust services available through banking and trust affiliates in addition to non-affiliated companies of Wells Fargo & Company. Insurance products are available through insurance subsidiaries of Wells Fargo & Company and underwritten by non-affiliated Insurance Companies. Not available in all states.

© 2017 Wells Fargo Bank N.A. Member FDIC. NMLSR ID 399801 ECG-3898701

Wealth Planning n Investments n Private Banking n Trust Services n Insurance | wellsfargoprivatebank.com

MANAGING EXECUTIVE: Chip Flannagan, SVP and Regional Managing Director

FOCUS: Wells Fargo Wealth Management is one of the nation’s leading providers of financial services (#4 money manager in the United States per Barron’s) to affluent clients as well as high-net-worth clients served through Wells Fargo Private Bank. Wealth Management’s mission is to build enduring relationships on a foundation of sound, thoughtful and objective advice. We focus on our clients’ unique needs to deliver financial solutions that help them build, manage, preserve and transition their wealth.

CLIENTS: Clients that maintain combined balances of $5 million or greater are served by a complete team of highly experienced professionals with expertise in discretionary investment management, trust and fiduciary services, brokerage services, customized credit capabilities and financial/wealth planning. Clients with portfolios valued at between $1 million and $5 million are managed by individual team members on a customized basis, depending on their specific needs.

INVESTMENT PHILOSOPHY: Asset allocation is the core of our investment management process. We believe that a proper strategic allocation—possibly combined with a judicious use of tactical allocation shifts—maximizes our clients’ chances of achieving their investment goals. We use a quantitative process to construct “efficient frontiers” of portfolios that offer favorable risk/return tradeoffs for varying levels of risk.


Individuals: 10%


Pension and Profit Sharing Plans: 2.5%

Charitable Organizations: 2.5%


COMPANY NAME: Wells Fargo Private Bank

ADDRESS: 10 S. Wacker Dr., Suite 2800, Chicago, IL 60606 PHONE: 312-592-5600

WEBSITE: wellsfargo.com/theprivatebank

TOTAL EMPLOYEES: 120YEAR ESTABLISHED: 2007MINIMUM ACCOUNT: $1 millionAVERAGE ACCOUNT: $5 million

ASSETS UNDER MANAGEMENT: $3 billion assets$900 million deposits$1.3 billion loan outstandings

2017 EXECUTIVE GUIDE: WEALTH MANAGEMENT 28

A fter nearly a decade of talk that interest rates were ready to rise, actual hikes are finally here. The Federal Reserve raised

rates last December and then again in March. Two more rate hikes are expected this year. While interest rates remain low—the federal funds rate was 1 percent at the end of May—rising rates will have an impact on investment strategies. Investors need to carefully recalculate their approach, experts say. That means analyzing the outlook for stocks, bonds and alternatives that could provide a hedge against inflation. “Rising rates are a good thing,” says Brent Brodeski, CEO at Savant Capital Management, a fee-only registered investment advisor based in Rockford with offices throughout the Chicago area. “It means the economy is doing well.” In another sign of economic progress, the Federal Reserve said in May that it would start shrinking the $4.5 trillion balance sheet, or portfolio of government debt it amassed during the recession to prop up the nation’s economy. There had been concerns in the financial markets that a quick sell-off of the government’s holdings could trigger a rapid rise in interest rates. But the Federal Reserve said it would take a gradual approach to reduce its balance sheet in order to reduce the risk of rapid hikes. “We are not in a hyper-inflation environment,” says William T. Norris, managing director, chief investment officer and head of asset management for private wealth at The PrivateBank, Chicago. “Rates will rise slowly.” What investments perform well as interest rates tick up? Bonds continue to be an important part of a diversified portfolio. But long-term, bonds do not perform well in a rising interest rate environment, Savant’s Brodeski says. Some investors have made the mistake of chasing yields because of low rates and are now locked into long-term bonds or low-grade corporate bonds. “They’ll get their heads handed to them as the bonds go down in value,” Brodeski says, explaining that bond prices fall as interest rates rise. For now, Brodeski prefers short-term bonds (24 months or less) or intermediate-term bonds (two to 10 years). As rates slowly rise, short-term bonds that mature relatively quickly can be replaced by bonds with a higher yield.

Investors seeking a regular income stream, as well as safety, are better off with individual bonds rather than bond funds, according to Jack Ablin, chief investment officer, BMO Private Bank, Chicago. Bond fund prices move up and down and there is a risk investors could lose their principal. But, Ablin says, “A bond will always mature.” He

explains that an individual bond offers the security that the investor will have a certain amount coming due on a certain date. “A bond fund does not offer that certainty,” he says. Target-date maturity bond funds, a relatively new type of investment vehicle, offer another alternative, Ablin says. Target-date funds are meant to combine the benefits of individual bonds and bond funds by holding bonds until they mature. It’s important to note that investment strategies vary based on the needs of the individual. “We don’t make blanket recommendations,” says Rafia Hasan, director of investment at Wipfli Hewins Investment Advisors, an advisory firm in Chicago. “Our whole process starts with understanding client circumstances, needs and risk tolerance.” Bond funds can provide diversification that individual bonds do not, Hasan notes. Also, when investing in bonds or bond funds, Hasan advises investors to pay attention to fees and tax consequences. For example, tax-exempt municipal bonds should be held in taxable accounts, she says. Holding municipal bonds in a tax-deferred IRA defeats the purpose of the tax break.

Inflation protectionCertificates of deposit have always been popular with savers and should gradually offer better returns as rates rise. One safety-minded investor used CDs, insured by the FDIC, to create a 12-month investment ladder to catch rising rates.

As each certificate matures, it’s replaced with a certificate at a higher rate. The staggered maturities of the CDs also give the investor the flexibility to use the proceeds to invest in other vehicles as other opportunities arise, while providing access to cash. Investors concerned about inflation might consider Treasury Inflation Protected Securities or TIPS, Savant’s Brodeski says. “If interest rates are rising, inflation is probably going up.” TIPS are bonds backed by the government that pay a fixed interest rate twice a year. The principal is adjusted based on changes in the Consumer Price Index, an indicator of inflation. But investors are guaranteed to receive at least the return of their full principal amount. Another benefit: The interest paid on the bonds is exempt from state and local taxes. The PrivateBank’s Norris thinks adjustable-rate bonds could fare well as rates rise. These vehicles have rates that are adjusted periodically based on a formula linked to an index such as LIBOR, a benchmark for short-term interest rates. Also, stocks should continue to perform well as long as rates rise slowly. But if inflation takes hold, even though there’s little sign of it yet, Norris recommends what he calls an “infrastructure strategy” with investments in real estate, commodities and utilities. International and emerging market stocks have done well so far in 2017, and represent a good investment opportunity, Wipfli Hewins’ Hasan says. Bank stocks should do well in a rising rate environment, BMO’s Ablin says. The interest banks pay on deposits is less than what they make on long-term loans, which widens their margins and produces more profit, he explains. Mid-size and regional banks should fare best, he adds. What investments probably won’t do well in a slowly rising interest rate environment? Certain securities are sensitive to rate hikes, which can be overlooked by investors, BMO’s Ablin says. He points to real estate investment trusts, or REITs, as an example. These companies, which are traded on the stock exchanges, own income-producing real estate that passes earnings to investors as dividends. Lately, REITs have become a favorite of investors in search of income. But rising rates could make bonds a more attractive income vehicle than REITs, and result in REIT price declines. “Be careful,” Ablin advises.

Rising Interest Rates Shift Investment OutlookBy Jane Adler

“If interest rates are rising, inflation is probably going up.”-Brent Brodeski, CEO at Savant Capital Management

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Empowering Investorsto Build Ideal Futures

TRANSPARENT FEESINDEPENDENT ADVICE EVIDENCE BASED INVESTMENT APPROACH

investments | financial planning | tax | private trust | retirement plans 866-489-0500 | savantcapital.com“Ideal” is not intended to give assurance as to achieving successful results. See Important Disclosures at www.savantcapital.com.

MANAGING EXECUTIVE: Brent Brodeski, Chief Executive Officer

FOCUS: Firm’s Focus: Serving as a personal CFO, Savant helps clients manage the complexities of their investment, planning and tax strategies. Using a time-tested and evidence-based approach, investors can gain access to a personalized portfolio option and proactive, customized planning advice, while considering the tax implications over their lifetime. Savant provides a holistic approach for each client we are privileged to serve.

Savant is a Registered Investment Advisor, required by law to act in clients’ best interests. We’re independent and are unaffected by in-house product sales or quarterly earnings reports. Our transparent fee structure is based on how well we manage assets, not how often we make trades or sell products. We’re a vibrant firm that uses a team approach. We pride ourselves in the time we take to get to know our clients and what is most important to them.

CLIENTS: Savant offers integrative investment management and financial planning solutions to individuals, families, foundations, trust funds, retirement plans and nonprofit organizations. We also provide portfolio design, tax planning, tax preparation, advanced estate and wealth transfer planning and business consulting services.

INVESTMENT PHILOSOPHY: Our investment philosophy is designed to engineer broad, globally diversified portfolios that minimize risk and maximize after-tax return. This evidence-based strategy is founded on tried-and-true principles:

• The markets are efficient.• Asset allocation is important.• Markets are not predictable.• Broad diversification is necessary.• Take a global approach.• Actively manage taxes.• Eliminate excessive costs.• Systematically rebalance.• Optimize cash flow management.


Individuals: 22%



Corporations or Other Businesses:1%


COMPANY NAME: Savant Capital Management ADDRESS: 190 Buckley Dr., Rockford, IL 61107 (headquarters) with offices in Chicago, Geneva, Hoffman Estates, Naperville and Wilmette.PHONE: 866-489-0500

WEBSITE: savantcapital.com

TOTAL EMPLOYEES: 142YEAR ESTABLISHED: 1986

MINIMUM ACCOUNT: $50,000AVERAGE ACCOUNT: $1.2 million

ASSETS UNDER MANAGEMENT: $5.10 billion

Disclosure: Savant Capital Management is a Registered Investment Advisor. Savant’s marketing material should not be construed by any existing or prospective client as a guarantee that they will experience a certain level of results if they engage Savant’s services. Please see Important Disclosures at SavantCapital.

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